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World Liberty Financial Offloads Bitcoin to Pay Debt

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WLFI Token - CoinGecko

The Trump family’s DeFi protocol was forced to sell $5 million of BTC today to cover an Aave loan.

World Liberty Financial (WLFI), the decentralized finance (DeFi) protocol affiliated with President Trump’s sons, was forced to sell some Bitcoin at roughly $67,000 today to avoid liquidation on Aave.

According to Arkham Intelligence, the WLFI wallet was forced to liquidate more than 170 BTC, worth roughly $11 million, to repay its loans on Aave.

Meanwhile, the WLFI token is down 14% today, slightly underperforming BTC and ETH, which are both down 13%.

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WLFI Token - CoinGecko
WLFI Token – CoinGecko

WLFI has been in a consistent downtrend since its token launch in September. The token started trading on Sept. 1 at $0.23, or a $6.6 billion market capitalization, and now trades 65% lower at $0.115.

In addition to the protocol’s financial woes, Trump’s political opponents continue to call for probes and investigations into the DeFi protocol.

Today, U.S. Representative Ro Khanna announced that he has launched an investigation into a $500 million investment in WLFI from the United Arab Emirates. Back in November, Senators Elizabeth Warren and Jack Reed claimed that the protocol is tied to malicious actors from North Korea and Russia; however, it remains unclear if there has been any progress on this probe.

Warren, in particular, is no fan of cryptocurrency, broadly referring to DeFi users as “scammers” and labeling the GENIUS bill as a “grift.”

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Crypto World

Aave’s TVL Falls $8B After $293M Kelp DAO Hack

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Aave’s TVL Falls $8B After $293M Kelp DAO Hack

Total value locked on decentralized lending protocol Aave dropped by nearly $8 billion over the weekend after hackers behind the $293 million Kelp DAO exploit borrowed funds on Aave, leaving roughly $195 million in “bad debt” on the protocol and triggering withdrawals.

Data from DeFiLlama shows that Aave’s TVL fell from about $26.4 billion to $18.6 billion by Sunday, losing the top spot as the largest DeFi protocol. 

Aave v3’s lending pools for USDt (USDT) and USDC (USDC) are now at 100% utilization, meaning that more than $5.1 billion worth of stablecoins cannot be withdrawn until new liquidity arrives or borrows are repaid. 

$2,540 is available to be withdrawn from the $2.87 billion USDT pool on Aave v3 at the time of writing. Source: Aave

Aave’s TVL fall shows how rapidly risk from a single security incident can spread throughout the broader, interconnected DeFi lending market, potentially leading to a severe liquidity crisis.

The incident began on Saturday when hackers stole 116,500 Kelp DAO Restaked ETH (rsETH) tokens worth about $293 million from Kelp DAO’s LayerZero-powered bridge and used them as collateral on Aave v3 to borrow wrapped Ether (wETH).

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Crypto analytics platform Lookonchain said the move created about $195 million in “bad debt” on Aave, which contributed to the Aave (AAVE) token tanking nearly 20% from $112 on Saturday at 6:00 pm UTC to $89.5 about 25 hours later. 

Lookonchain noted that some of the largest crypto whales to withdraw funds from Aave were the MEXC crypto exchange and Abraxas Capital at $431 million and $392 million, respectively.

Source: Grvt

Several crypto networks and protocols tied to rsETH or the LayerZero bridge have paused use of the bridge until the problem is resolved, including DeFi platform Curve Finance, stablecoin issuer Ethena and BitGo’s Wrapped Bitcoin (WBTC).

Aave has frozen several rsETH, wETH markets

Shortly after the Kelp DAO exploit, Aave said it froze the rsETH markets on both Aave v3 and v4 to prevent any suspicious borrowing and later stated that rsETH on Ethereum mainnet remains fully backed by underlying assets.

WETH reserves also remain frozen on Ethereum, Arbitrum, Base, Mantle and Linea, Aave said.

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This incident marks the first significant stress test of Aave’s “Umbrella” security model, which was introduced in June 2025 to provide automated protection against protocol bad debt while enabling users to earn rewards.

Related: Aave DAO backs V4 mainnet plan in near-unanimous vote

Earlier this month, the Bank of Canada found that Aave avoided bad debt in its v3 market by using overcollateralization, automated liquidations and other strategies that shifted risk to borrowers.

In comments to Cointelegraph, Aave defended its liquidation-based model, framing it as a core safety mechanism that protects lenders while limiting downside for borrowers.

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It comes as Aave parted ways with its longest-standing DeFi risk service provider, Chaos Labs, on April 6, following disagreements over the direction of Aave v4 and budget constraints.

Magazine: Are DeFi devs liable for the illegal activity of others on their platforms?